Red Alert: Chinese Telecoms and Cyberattack Jitters

"Since so much of our economy is driven by the use of telecommunications and Internet providers and whatnot, I think that's why people are getting really, really nervous about a company where we have a strained relationship with their home country," said author Brian Proffitt.

The House Intelligence Committee's investigation into Chinese telecommunications giants Huawei and ZTE climaxed last week, concluding, essentially, that the Chinese firms
aren't to be trusted.

That set off a spate of stories, including on-the-record denials from Huawei and reports that, for the last year, U.S. telecoms have waged a campaign against their Chinese competitors. That U.S. Defense Secretary Leon Panetta announced that a "cyber Pearl Harbor" could be on the horizon only fanned the cybersecurity storyline.

Listen to this week's podcast about cybersecurity in general -- and China in particular -- featuring
Brian Proffitt, author of The PayPal Official Insider Guide to Selling with Social Media and an instructor at the University of Notre Dame. Proffitt, who's been reporting on cybersecurity at ReadWriteWeb, talks about the various factors that complicate the recent House report, including China's threat to business may have been as much a factor as its threat to security.

TechNewsWorld: Let me start by asking if there is any sort of precedent for the recent report we heard from the House committee. They essentially said that these Chinese telecommunications firms, Huawei and ZTE in particular, should not be allowed to mingle in the U.S. telecommunications infrastructure, that they weren't on the up-and-up. There are some military and government connections that have raised a lot of eyebrows.

So I'm curious, from a technological standpoint, if this has happened before. We've seen suspicions of foreign countries -- Russia and other countries -- in the past, but what about specifically from this sort of tech angle? Is this something you've seen before?

Brian Proffitt: I think this is something that's a bit unique in terms of -- we're doing it in this sector of technology. I think the closest thing I've seen historically that this is analogous to is when the Japanese car industry came on like gangbusters in the late 70s and early 80s. And we had a real serious pushback from Capitol Hill, from the Detroit automakers, who were responding quite negatively to the influx of all these news cars coming in.

I think really there are a lot of parallels between what happened back then when you had all these cars come in that were initially, eh, not that great, but they improved very quickly and even surpassed Detroit in terms of quality, some would say. And meanwhile Capitol Hill is setting up all sorts of trade barriers, and there were times there when it looked like a full-on trade war.

And I think really what we're seeing today -- and I think it's amplified and made far more negative by the presence of social media and whatnot -- is the repeat of that kind of thing. You have China, and they're getting in the telecommunications industry, their economy is sort of booming, they're trying to do their best. But they're working within a system where private and state is a very fuzzy line, so there are some concerns there.

Couple that with an America which is trying to recover from its own economic problems. We have an election year. I think it's a perfect recipe for this kind of protectionism we're seeing. And the problem for everybody is, we don't know what's legitimate here and what's not.

TNW: Was there any sort of this protectionism -- you used that word and that's also a word that's been used by Huawei spokespeople -- this kind of protectionist ruling that we saw last week, was there any of that going on when the Japanese tech companies were booming? Was that just too different of a situation to compare? Or is it instructive that Japan was able to rise coinciding with the U.S., whereas we're sort of putting the screws on China?

Proffitt: Well, I think there are a couple differences. When the Japanese electronics came up, I do remember there was some pushback, but there are key differences there. I don't think the U.S. was as threatened because Japan was always viewed as an ally. Even today, we don't give Samsung any beef about any of the electronics they make because that's South Korea and that's an ally. And we tend to treat our allies better than our non-allies. So there's that.

And I think the other thing that's made this a little bit different is the fact that we're not talking about the smartphones and the handheld electronic devices that Huawei and ZTE make. We're talking about really high-level, high-end, high-volume routers that can go deep into our telecommunications system.

And since so much of our economy is driven by the use of telecommunications and Internet providers and whatnot, I think that's why people are getting really, really nervous about a company where we have a strained relationship with their home country. I think those are the key differences. It's not just consumers who are going to be affected by this. It could be, you know, real infrastructure in our private and government facilities.

TNW: If China was bent on accessing data, getting secrets, whatever, is preventing Huawei from building our networks going to be enough to stop it? Are they scapegoating Huawei when the real threat is some sort of sophisticated cyberattack as opposed to this commercial company? Or is this the very way that it would happen?

Proffitt: I think there is a little bit of both going on. I think Huawei and the other companies are sort of getting screwed a little bit. And again, it's really tricky to tell if that scapegoating is deserved or not. I think the U.S. is probably taking the position that says, "Better safe than sorry." Because there probably will be a sophisticated cyberattack.

Curiously, when defense secretary Leon Panetta brought it up last week in that speech in New York City, and he started talking about America's active cyberresponse, that we would actually be going on the offensive, he mentioned China, but only as an aside. So I think what the U.S. is doing -- and this is where we have to judge whether our politicians are right -- is they're saying, "Well, it's probably not going to stop a cyberattack, but we'll just make a good-faith effort to not make it any easier."